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Avalon, Deninu Ku'e sign deal

Lyndsay Herman
Northern News Services
Published Monday, June 18, 2012

The Deninu Ku'e First Nation and Avalon Rare Metals Inc. signed an accommodation agreement June 7 that will enter them into a business relationship not often seen in the territory.

The agreement relates to Avalon's Nechalacho Rare Earth Element Project at Thor Lake.

"In the past you've seen arrangements where there's revenue sharing through a royalty type arrangement, where there's a sort of percentage of revenue or profits paid out to the community in recognition of their traditional use of the land and the impacts on it," said Don Bubar, president and chief executive officer for Avalon Rare Metals Inc.

"What we've tried to do here is something a little bit different to that. What we've offered is a sort of equity position in the business going forward so it makes the First Nation become an investor in the project."

A news release announcing the agreement describes the arrangement as a "limited partnership" where the Deninu Ku'e First Nation will acquire 3,333 limited partnership units as Avalon obtains certain regulatory permits and approvals.

Avalon will also issue the Deninu Ku'e First Nation 10,000 common shares of the company and 50,000 non-transferable common share purchase warrants. Avalon will issue five instalments of 10,000 common share purchase warrants per year for five years, each with a term of five years and will have an exercise price based on the current market price of Avalon's common shares at the date of issue of the warrants.

"The advantage from our position is it creates a better alignment of interests in that we're all in it together as investors working ... to achieve the best possible outcome for all parties," said Bubar.

"The type of arrangement hasn't been done a lot in the past so we're kind of proud that we were able to come to this type of arrangement with the Deninu Ku'e. We think it's a model that will be adopted more and more going forward and ultimately benefits the First Nation in that they will have a real equity stake, a valuable stake, and that ... can be leveraged into other business opportunities."

The agreement outlines employment and job training opportunities for the Deninu Ku'e First Nation and measures to mitigate the project's impacts on the environment and Deninu culture.

The news release also states the Deninu Ku'e agree to support "timely completion of the environmental assessment, permitting and development process of the project" by signing on to the agreement.

Louis Balsillie, chief of the Deninu Ku'e First Nation, declined to comment on the accommodation agreement but states in the news release that the Deninu Ku'e look forward to implementing the accommodation agreement and "appreciate Avalon's efforts to respect our relationship to our territorial lands and waters."

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